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Financial systems and the role of banks in monetary policy transmission in the euro area

  • Sevestre, Patrick
  • Martinez-Pages, Jorge
  • Gambacorta, Leonardo
  • Ehrmann, Michael
  • Worms, Andreas

This paper offers a comprehensive comparison of the structure of banking and financial markets in the euro area. Based on this, several hypotheses about the role of banks in monetary policy transmission are developed. Many of the predictions that have been proposed for the U.S. are deemed unlikely to apply in Europe. Testing these hypotheses we find that monetary policy does alter bank loan supply, with the effects most dependent on the liquidity of individual banks. Unlike in the US, the size of a bank does generally not explain its lending reaction. We also show that the standard publicly available database, BankScope, obscures the heterogeneity across banks. Indeed, for several types of questions BankScope data suggest very different answers than more complete data that reside at national central banks.

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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2001,18.

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Date of creation: 2001
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Handle: RePEc:zbw:bubdp1:4163
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  1. Ignacio Hernando & Jorge Martínez Pagés, 2001. "Is There a Bank Lending Channel of Monetary Policy in Spain?," Working Papers 0117, Banco de España;Working Papers Homepage.
  2. Corvoisier, Sandrine & Gropp, Reint, 2001. "Bank Concentration and Retail Interest Rates," Working Paper Series 0072, European Central Bank.
  3. Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
  4. Luísa Farinha & Carlos Robalo Marques, 2002. "The bank lending channel of monetary policy: identification and estimation using Portuguese micro bank data," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 A4-3, International Conferences on Panel Data.
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  7. Ehrmann, Michael & Worms, Andreas, 2001. "Interbank lending and monetary policy transmission: evidence for Germany," Discussion Paper Series 1: Economic Studies 2001,11, Deutsche Bundesbank, Research Centre.
  8. Francesco Giavazzi, 1999. "The Transmission Mechanism of Monetary Policy in Europe: Evidence from Banks’ Balance Sheets," Working papers 99-20, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Gambacorta, Leonardo, 2003. "Asymmetric bank lending channels and ECB monetary policy," Economic Modelling, Elsevier, vol. 20(1), pages 25-46, January.
  10. Worms, Andreas, 2001. "The reaction of bank lending to monetary policy measures in Germany," Working Paper Series 0096, European Central Bank.
  11. L. de Haan, 2001. "The Credit Channel in the Netherlands: Evidence from Bank Balance Sheets," WO Research Memoranda (discontinued) 674, Netherlands Central Bank, Research Department.
  12. Topi, Jukka & Vilmunen, Jouko, 2001. "Transmission of monetary policy shocks in Finland: evidence from bank level data on loans," Working Paper Series 0100, European Central Bank.
  13. Raghuram G. Rajan & Luigi Zingales, 1998. "Which Capitalism? Lessons Form The East Asian Crisis," Journal of Applied Corporate Finance, Morgan Stanley, vol. 11(3), pages 40-48.
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  15. G.J. de Bondt & A.C.J. Stokman, 2000. "The importance of financial structure for monetary transmission in Europe," WO Research Memoranda (discontinued) 616, Netherlands Central Bank, Research Department.
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  17. Frederic S. Mishkin, 1995. "Symposium on the Monetary Transmission Mechanism," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 3-10, Fall.
  18. Anil K Kashyap & Jeremy C. Stein, 1994. "The Impact of Monetary Policy on Bank Balance Sheets," NBER Working Papers 4821, National Bureau of Economic Research, Inc.
  19. Luca Sala, 2002. "Monetary Transmission in the Euro Area: A Factor Model Approach," Macroeconomics 0205005, EconWPA, revised 15 May 2002.
  20. Bernanke, Ben S & Blinder, Alan S, 1988. "Credit, Money, and Aggregate Demand," American Economic Review, American Economic Association, vol. 78(2), pages 435-39, May.
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  22. Loupias, Claire & Savignac, Frédérique & Sevestre, Patrick, 2001. "Monetary policy and bank lending in France: are there asymmetries?," Working Paper Series 0101, European Central Bank.
  23. Mojon, Benoît, 2000. "Financial structure and the interest rate channel of ECB monetary policy," Working Paper Series 0040, European Central Bank.
  24. Hernando, Ignacio & Martinéz Pagés, Jorge, 2001. "Is there a bank lending channel of monetary policy in Spain?," Working Paper Series 0099, European Central Bank.
  25. Peersman, Gert & Smets, Frank, 2001. "The monetary transmission mechanism in the euro area: more evidence from VAR analysis," Working Paper Series 0091, European Central Bank.
  26. Kishan, Ruby P & Opiela, Timothy P, 2000. "Bank Size, Bank Capital, and the Bank Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 121-41, February.
  27. Brissimis, Sophocles N. & Kamberoglou, Nicos C. & Simigiannis, George T., 2001. "Is there a bank lending channel of monetary policy in Greece? Evidence from bank level data," Working Paper Series 0104, European Central Bank.
  28. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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